Fiddling while Rome burns

The AP carries an analysis suggesting that Wall Street is moderately optimistic that the worst of the current financial mess is behind us.

Entitlement is the term that comes to mind. To believe, even as “12.7 percent of all residential borrowers” may lose their homes, as people stockpile rice, as rioters protest food shortages around the world, as oil prices reach $120 per barrel, and as gasoline prices breach $4.00 per gallon, even as middle, lower, and working class incomes remain stagnant, that we are through with this recession clearly requires self-delusion. This belief rests on an assumption that all these people still have money to spend, even if they can no longer rely on increased home values, and even if living costs are skyrocketing.

One can almost hear an elite mantra, We’ll be all right. We’ve been on top of this game for thousands of years, really since the foundation of cities. We’ve survived turmoil and tumult before. We’ll be all right.

But a declining dollar makes dollar-denominated debt less attractive. And only foreigners can finance a $9 trillion US debt; the US savings rate has been low for decades and can’t be expected to rise during a recession. We’ll be all right.

A professor who has disappointed me recently ridicules a chicken little argument. He doesn’t see the sky falling. Since he relies on noblesse oblige as a style of governance, I assume he figures the elite will pull some other trick out of their bag to get through this. Perhaps they will, but I am really wondering what will be happening about two years from now, after what looks to be President Barack Obama’s first year in office, and we’re still embroiled in Iraq and economic conditions have continued to deteriorate.

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